Contribution claims by brokers against third parties

(Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services [2002] Lloyd’s Rep IR 185; Royal Brompton Hospital NHS Trust v Hammond [2002] 2 All ER 801)

Assume the scenario in which an assured has instructed brokers to procure insurance for him, but that they have failed to do so. The assured then suffers a loss at the hands of a third party, and the assured brings an action against the brokers for that loss on the basis that it should have been covered by insurance. Had there been insurance in place, the insurers, having indemnified the assured, could have sued the third party by way of subrogation. However, in the absence of insurance, the decision of the assured to sue the brokers in effect confers a windfall upon the third party, as he escapes liability. It may of course be the case that the assured sues both the brokers and the third party for specific proportions of the loss. However, if the action is confined to the brokers, the question arises whether the brokers can themselves seek contribution from the third party? The Court of Appeal in Hurstwood Developments Ltd v Motor & General & Andersley & Co Insurance Services [2002] Lloyd’s Rep IR 185 felt that contribution was available in these circumstances, but in Royal Brompton Hospital NHS Trust v Hammond [2002] 2 All ER 801 decided shortly afterwards, the House of Lords held that Hurstwood had been wrongly decided.